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August 16, 2020

U.S. Tax This Week for August 14

Ernst & Young's U.S. Tax This Week newsletter for the week ending August 14 is now available. Prepared by Ernst & Young's National Tax Department in Washington, D.C., this weekly update summarizes important news, cases, and other developments in U.S. taxation.

Top of the Week

Final and proposed regulations under IRC Section 163(j): Partnership-specific provisions

On July 28, the Treasury Department (Treasury) released final regulations (TD 9905) providing guidance for applying the limitations on the deductibility of business interest expense (BIE) under IRC Section 163(j) (the Final Regulations). Accompanying proposed regulations (REG-107911-18) (the Proposed Regulations) would provide additional guidance on several other aspects of the limitation, including specific aspects of the limitation as applied to partnerships. EY Tax Alert 2020-2034 has details.

Employee Social Security tax deferral is voluntary, according to Treasury Secretary Mnuchin

When asked about the employee deferral of Social Security that is effective September 1, 2020, under President Trump's executive order, Treasury Secretary Steven Mnuchin told Fox Business News on August 12, 2020, that "you can't force people to participate." The statement was in response to the comment that employers face costs, uncertainties and headaches (implementing the program). EY Tax Alert 2020-2053 has details.

Upcoming Webcasts

Final and proposed Section 163(j) regulations: Impact on real estate and partnerships (August 17)
During this Thought Center Webcast, Ernst & Young professionals will discuss the final and proposed Section 163(j) regulations, which include guidance on the business interest expense limitations as they apply to partnerships and the real estate industry.

Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments (August 21)
The coronavirus (COVID-19) and the resulting economic crisis have made reacting to tax and trade developments more complicated and more difficult. During this Thought Center Webcast, Ernst & Young professionals will have a conversation about operating the tax function in this time of National Emergency created by the COVID-19 virus. Panelists will provide updates on: (i) the US legislative and economic landscape; (ii) breaking developments – federal and state; and (iii) what’s happening at the IRS.

Recent Tax Alerts

Internal Revenue Service

— Aug 13: IRS issues final regulations on donations to charities in exchange for SALT credits (Tax Alert 2020-2059)

— Aug 12: IRS announces 2021 user fee increases for certain determination letter and letter ruling requests (Tax Alert 2020-2043)

— Aug 11: Tax M&A Update for July 2020 (Tax Alert 2020-2035)

— Aug 11: Final and proposed regulations under IRC Section 163(j): Partnership-specific provisions (Tax Alert 2020-2034)

— Aug 10: QUEST Economic Update highlights key US and global economic trends — August 10, 2020 (Tax Alert 2020-2028)

— Aug 10: Key implications of the IRC Section 1061 carried interest proposed regulations for passthroughs, including private equity and alternative funds (Tax Alert 2020-2026)

— Aug 07: IRS issues final regulations providing safe harbors for certain charitable donations by businesses and individuals, and addressing quid pro quo benefits received in return for some donations (Tax Alert 2020-2018)

— Aug 07: IRS will allow leave sharing in connection with COVID-19 (Tax Alert 2020-2010)


— Aug 13: PE Watch | Latest developments and trends, August 2020 (Tax Alert 2020-2058)

— Aug 13: Portugal postpones MDR reporting deadlines for six months (Tax Alert 2020-2057)

— Aug 13: Slovakia postpones MDR reporting deadlines for six months (Tax Alert 2020-2056)

— Aug 13: Greece amends taxation of legal entities (Tax Alert 2020-2055)

— Aug 13: Panamanian Tax Authority includes a new category for foreign companies that act as legal representatives of Panamanian corporations within the Registry of Taxpayers and the e-tax 2.0 system (Tax Alert 2020-2052)

— Aug 12: Russia and Cyprus reach consensus over tax treaty (Tax Alert 2020-2048)

— Aug 12: Australian Taxation Office issues final guidance on thin capitalization arm's-length debt test and draft guidance on "outbound" interest-free loans (Tax Alert 2020-2047)

— Aug 12: Belgium's Tax Authority publishes MDR FAQs (Tax Alert 2020-2046)

— Aug 11: Colombia issues regulations on the income tax credit for the VAT paid on Real Productive Fixed Assets (Tax Alert 2020-2038)

— Aug 11: Japanese tax authorities reorganize tax audit teams into single unit to cover domestic, international and transfer pricing issues (Tax Alert 2020-2037)

— Aug 10: Australia's border restrictions and quarantine arrangements to remain in place (Tax Alert 2020-2025)

— Aug 10: Australia announces changes to broaden JKP eligibility criteria (Tax Alert 2020-2024)

— Aug 10: Saudi Arabia extends economic relief initiatives for three months (Tax Alert 2020-2023)

— Aug 07: US imposes 10% punitive tariff on Canadian-origin aluminum; Canada announces countermeasures in response (Tax Alert 2020-2019)

— Aug 07: Ecuador issues regulations on VAT on digital services (Tax Alert 2020-2017)

— Aug 07: Brazil's tax reform proposal would affect taxpayers participating in certain special regimes, including customs incentives (Tax Alert 2020-2016)

— Aug 07: Greece introduces new tax dispute resolution mechanisms (Tax Alert 2020-2014)


— Aug 14: What to expect in Washington (August 14) (Tax Alert 2020-2067)

— Aug 10: President Trump's executive order allows for deferral of employee Social Security tax as part of COVID-19 emergency relief (Tax Alert 2020-2021)


— Aug 13: Wyoming legislation provides for employer workers' compensation credits; non-charge of COVID-19 workers' compensation benefits (Tax Alert 2020-2054)

— Aug 13: Employee Social Security tax deferral is voluntary, according to Treasury Secretary Mnuchin (Tax Alert 2020-2053)

— Aug 12: St. Louis, Missouri provides earnings tax guidance for teleworkers and their employers during the COVID-19 emergency (Tax Alert 2020-2044)

— Aug 11: New Hampshire and Connecticut federal lawmakers take action to stop states from imposing income tax on out-of-state teleworkers (Tax Alert 2020-2036)

— Aug 07: Final regulations under IRC Section 163(j) have state tax implications (Tax Alert 2020-2008)

Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

California FTB holds fifth interested parties meeting to discuss the next round of proposed amendments to its market-based sourcing rules. On July 21, 2020, the California Franchise Tax Board (FTB) held its fifth Interested Parties Meeting (5th IPM (and preceding IPMs referred to sequentially)), continuing ongoing discussions between the FTB and the public for the next round of proposed amendments to its market-based sourcing rules for California income tax purposes (to be codified at California Code of Regulations, title 18, (CCR) section 25136-2 (Regulation)).

— Income/Franchise, Sales & Use, Business Incentives, Property Tax, Compliance & Reporting, Controversy, Payroll & Employment Tax, Miscellaneous Tax, Value Added Tax

IRS Weekly Wrap-Up

Final Regulations

 TD 9907Treatment of Payments to Charitable Entities in Return for Consideration
 TD 9896Rules Regarding Certain Hybrid Arrangements; Correcting Amendment
 TD 9885Base Erosion and Anti-Abuse Tax; Correcting Amendment

Proposed Regulations

 REG-107213-18Guidance Under Section 1061


 REG-106013-19Guidance Involving Hybrid Arrangements and the Allocation of Deductions Attributable to Certain Disqualified Payments Under Section 951A (Global Intangible Low-Taxed Income); Correction


 2020-14Changes to User Fees for Certain Letter Ruling and Determination Letter Requests Submitted to Employee Plans Rulings and Agreements, Effective January 4, 2021

Internal Revenue Bulletin

 2020-33Internal Revenue Bulletin of August 10, 2020
 2020-34Internal Revenue Bulletin of August 17, 2020

Because the matters covered herein are complicated, U.S. Tax This Week should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.